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Welcome to MoneyTransferComparion’s economy and currency news section. Our expert economist will be happy to provide you with a free overview of the most interesting things that happened last week in the world of currencies, as well as a prediction for next week’s happenings.

This section is slightly technical. If you need any assistance on international money transfer and how they work please view our FAQ. If you want to understand the basic concept behind how events impact currencies go here, Trade Account is explained here, and we have also created a top list events in history that impacted currencies for your pleasure.

Analysis and Prediction:

Date of publication: December 11, 2017 | Author: Tim Clayton

Last Week’s Summary

Daily news newspaper headline

US

US non-farm payrolls increased 228,000 for November which was above consensus estimates of 200,000, although the October estimate was revised down to 244,000 from 261,000.

Unemployment remained at a 17-year low of 4.1% while the increase in average earnings was held to 0.2% to give a 2.5% year-on-year increase.

The data overall had little market reaction with no implications for monetary policy.  Markets continued to price in at least a 90% chance that rates would be increased at the December FOMC meeting.

Markets remained optimistic over tax-reform prospects with both Houses of Congress voting to put the legislation to reconciliation. There were expectations that legislation would be passed before year-end, bolstering confidence in the 2018 growth outlook.

There were no developments in special Counsel Mueller’s investigation into the Trump Administration and Russian involvement in the 2016 Presidential election which limited any selling pressure on the US currency.

The dollar overall gained ground on optimism surrounding the 2018 outlook.

UK

Political events dominated the week with Brexit talks a major market focus.

Sterling rallied strongly on Monday with the UK on the point of agreement with the EU on moving to the nest stage of talks.  There was, however, a last-minute breakdown in the talks following opposition by the Northern Ireland Democratic Unionist Party (DUP).

After frantic diplomacy during the following few days, agreement was finally reached on Friday. The EU Commission will now recommend that the talks move to the second phase with the start of negotiations on the future trade relationship.

The agreement curbed fears over a disruptive exit from the EU, especially with the potential for a 2-year transition phase. Sterling moved higher on the deal, although it failed to hold its best levels as profit taking emerged.

UK PMI releases were mixed with stronger than expected readings for the manufacturing and construction releases, but there was a weaker reading for services.

Despite losses on Friday, Sterling made net gains during the week with EUR/GBP below 0.8800.

Euro-zone

There were no major Euro-zone economic developments during the week with attention focussed elsewhere. German political parties made no significant progress in forming a coalition government.

The Euro was undermined by adverse yield spreads while senior ECB officials were silent ahead of this week’s monetary policy decision.

International

The Reserve Bank of Australia maintained interest rates at 1.50% as underlying yield spreads undermining the Australian dollar.

The Bank of Canada maintained interest rates at 1.00% following the latest policy meeting. The bank was cautious over the outlook and the Canadian dollar moved significantly lower as commodity currencies lost ground during the week.

Next Week’s Forecast & Events

Global financial forecast symbol with globe, 3d render, white background

There are a number of important events during the week ahead with markets also starting to focus on year-end trading. Details of the economic calendar are here:

US

The week is full of important US set-piece events and political developments will also be important.

As far as the data is concerned, the latest CPI release is due on Wednesday with the retail sales data on Thursday. The New York Empire survey is also due on Friday. The inflation data will be particularly important for yield expectations.

The Federal Reserve will announce its latest monetary policy decision on Wednesday. The latest economic projections will also be released and chair Yellen will hold her last press conference before leaving the Fed at the end of January.

There is a very strong probability that the Fed Funds interest rates will be increased by a further 0.25% to a 1.25-1.50% range.  The decision to raise rates is unlikely to support the dollar directly as markets have already assumed that rates will be increased.

The policy statement and projections of interest rates will, however, be very important for underlying dollar sentiment and expectations of the 2018 outlook.

If the Fed is more confident that inflation will increase, there is scope for net dollar gains.

Political developments will also be important as both houses of Congress look to finalise the tax-reform package. Evidence of strong progress would be important in underpinning the dollar.

UK

Sterling also faces another busy week with important data releases including the inflation data on Tuesday. Labour market and retail sales data will be released on Wednesday and Thursday respectively. Strong data would increase expectations that the Bank of England will need to raise interest rates further.

The Bank of England will announce its latest policy decision on Thursday and it is very unlikely that there will be another increase in interest rates.

The statement and minutes will, however, be important for underlying expectations and will have a significant Sterling impact.

Political developments will also be monitored closely with the EU Council held on Thursday and Friday. Agreement to move on to the next phase of Brexit talks should be ratified at the meeting, but the rhetoric will still be very important for sentiment.

Euro-zone

The ECB will announce its latest decision on interest rates on Thursday and no change in interest rates is expected. The rhetoric from bank President Draghi will still be important, especially as Euro-zone growth data has been very strong.

The Euro-zone PMI manufacturing data will also be released on Thursday.

International

The Swiss National Bank will announce its latest interest rate decision on Thursday with no change in interest rates expected.

Australia’s employment data is also due for release on Thursday.

Currency Forecast for Next Week

Currency pairSpot 1-week forecast1-month forecast
EUR/USD1.1771.1701.155
USD/JPY113.5114.4115.0
EUR/GBP0.8790.8820.865
GBP/EUR1.1381.1341.156
GBP/USD1.3391.3271.335
AUD/USD0.7500.7450.735
USD/CAD1.2851.2801.295
USD/SGD1.3521.3571.370
USD/HKD7.8077.8057.815
NZD/USD0.6840.6800.660
GBP/JPY152.0151.7153.6
GBP/AUD1.7851.7811.817
GBP/NZD1.9591.9512.023
GBP/SGD1.8101.8001.829
GBP/HKD10.4510.3510.43
GBP/CHF1.3301.3301.358

 

 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 


Information expressed in this article and on MoneyTransferComparison.com as a whole does not constitute as financial advice. If you decide to make any actions based on the information you read, we shall not be held responsible.

 

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